We have used recombinant DNA technology to isolate and characterize the avian myelocytomatosis (MC29) sequences which are essential in the transformation process. Integrated MC29 proviral DNA was isolated from a library of recombiant phage containing DNA from the MC29-transformed nonproducer quail cell line Q5. The cloned DNA was analyzed by Southern blotting of restriction endonuclease digests and by electron microscopic visulaization of R-loops formed between the cloned DNA and MC29 or helper virus RNA. It was found that the 9.2 kb cloned DNA insert contains approximately 4 kb of viral sequences and 5.2 kb of quail cellular sequencees. The viral sequences contain all of the MC29-specific sequences and 5' helper-related sequences, as well as part of the envelope region. The size of the cloned EcoRI fragment is the same as that of the major band in EcoRI-celaved Q5 DNA that hybridizes to viral sequences. Transfection of the cloned DNA into NIH 3T3 cells revealed that the MC29-specific sequences are functional in that they induce foci of transformed cells with high efficiency. We have used this MC29 clone to screen a lambdaphage/chicken DNA library for cellular sequences homologous to the viral MC29 sequence. The endogenous MC29 clone contains all MC29 specific sequences and a 1.3 kb cellular intervening sequence.